The North Carolina Senate Modifies Proposed Changes to Various Taxes

August 10, 2015 In June we informed you of an amendment made by the North Carolina Senate to House Bill 117, which included several proposed changes to NC taxes. June 16, 2015 Article
In continued efforts to refine their proposals and prepare for further discussions with the House, on August 6 the Senate adopted a substitute of the original House bill. The latest changes are significant. Following are a few highlights.
• The bill removes the previous provision to expand sales tax to certain services: those included advertising, veterinary and pet care and repairs and maintenance work performed on tangible personal property.
• The bill removes the proposed increase to the cap on the manufacturing privilege tax; a tax paid by NC manufacturing firms on their machinery and equipment.
• The bill removes certain individual and corporate income tax provisions from the last version, which included lowering the rates and increasing personal itemized deductions.
• The bill makes significant changes to the proposed redistribution of sales tax among counties. Currently 75% of allocable revenue is distributed to counties where sales occur, and 25% based on each county’s population. The Senate’s previous version of H117 shifted the distribution over time to 20% based on point of sale and 80% on population. This most recent Senate amendment proposes a 50% allocation based on point of sale and 50% on population. Certain restrictions on a county’s use of the funds are also changed and relaxed. Also, unlike the previous phase-in proposed to happen over four years, this bill would make the changes fully effective on July 1, 2016.
• The bill maintains provisions to fund the Job Development Investment Grant (JDIG) program, and it still includes modifications to the state’s One NC incentive program.
The Senate’s substitute to House Bill 117 also includes several other provisions not addressed here. The bill has been referred to the Committee on Appropriations, which will take it up for further consideration as part of the budget process.
Note that several of the provisions removed by the Senate from H117 are still part of budget legislation, House Bill 97, 2015 Appropriations Act.
JPS encourages you to contact your representatives to discuss what is being proposed in this legislation.

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